Napster R.I.P.?

Napster R.I.P.?

Napster R.I.P.?

Moneybox
Commentary about business and finance.
July 27 2000 3:05 PM

Napster R.I.P.?

Wednesday's ruling by a California judge that Napster must shut down its popular music-file-swapping feature has caused a lot of teeth-gnashing. Could this be the end, so soon, of the so-called "peer-to-peer" craze?

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As a person who buys a fair number of CDs, I'm as attracted as anyone to the idea of technology like Napster's. It's an incredibly clever and impressive creation. I completely understand, and even empathize with, people who are sick of bloated CD prices. And I even get the attraction to the revolutionary, cut-out-the-useless-middleman rhetoric that surrounds the peer-to-peer notion: Even if Napster goes down, the tech revolutionaries promise, successor companies such as Gnutella will ensure that file-swapping, without the annoying "friction" created by the current recording industry apparatus, will continue unabated. Two points are supposed to follow from this. One, repeated almost constantly by an army of self-styled contrarians from the very second that Napster first appeared, is that the recording industry is toast. And two is that there is nothing it can do via the courts to stop a Gnutella-like foe, whose technology works in such a way that there is nothing to shut down.

But is either of those points really true? If file-swapping continues, does it follow that the recording industry collapses? I still don't think so. There have been conflicting reports as to whether Napster's popularity caused people to buy more or fewer CDs, but even if it's the latter, the negative effect has been pretty small. And it's worth remembering that videocassettes didn't wipe out the movie business--nor did they cause the price of movie tickets to fall. 

I'm also not so sure that the record industry wouldn't be able to do anything about Gnutella-type technology. I don't know what the Gnutella creators' plans are, but anyone trying to make money using a Gnutella variation would have to create some of that "friction" that the peer-to-peer revolutionaries complain about. After all, Napster's ultimate goal isn't really to eliminate the middleman, Napster's goal is to be the middleman, and to make a lot of money as a result. (It's never been clear to me how they would do this, and to date Napster has not earned a penny.)

If Gnutella or any similar outfit intends to make money, it will have to introduce some friction to the process; and if any firm ends up earning profits by making it easy for other people to circumvent copyright law, it doesn't seem that it would be all hard to go after that firm in the courts. So, it may be right that it is impossible to stop technology that allows people to swap digital files. But what if it also turns out to be prohibitively difficult to profit from that technology, at least without getting the copyright owners on board? In other words, what if the technology lived on, but no one ever made any money off it? That would certainly be revolutionary. And it might even be fine with some of the revolutionaries writing the impressive programs that make it all possible. But I'm not sure how investors betting on peer-to-peer as a business trend would feel about it.